Investments in tech start-ups setting new benchmarks in 2017
- Top 100 funded German tech start-ups accumulate venture capital of more than USD 8b as of December 2017
- VC investors set up new funds for tech start-up investments in Germany with a volume of almost USD 8b
- International financial investors form basis of German tech scene with large-scale investments
- Successful IPOs in 2017 underline the sustainability of the market
- Deep tech business models in the artificial intelligence and blockchain sectors the next growth driver
Record year for German tech start-up scene
International investors and successful IPOs have lifted the German tech start-up scene to a new level in 2017. “We are seeing more activity from global financial investors, which help start-ups with large-scale investments to become IPO ready. Germany is one of the key target markets in Europe in this regard,” says Dr. Thomas Prüver, Partner in EY’s Transaction Advisory Services practice and expert for Venture Capital and TMT transactions. In EY’s new study, ”Fast growth in Germany: Tech start-ups and investors setting new benchmarks”, Prüver investigates the transaction market for fast-growing technology businesses in Germany.
Prüver and his team analyze amongst other things the top 100 funded German start-ups, which had accumulated funding of more than USD 8b by the end of 2017 and set new benchmarks in Germany and Europe. About 70% of the raised venture capital was invested in Berlin-based start-ups. “The German tech start-up scene has developed successfully. It has grown into an industry of its own,” says Thomas Prüver.
About half of the top 100 funded businesses are less than seven years old, which underscores the momentum of the still fledgling market. Corporates are become increasingly involved as investors for growth financing. Whilst in recent years corporate investors primarily consisted of large media houses and consumer retail businesses, a broadening of the investor landscape can now be observed. Large and medium-sized entities from a variety of sectors are funding and acquiring fast-growing tech businesses at an unprecedented level to strengthen their own digital businesses. “Corporates need to address the market for fast-growing tech businesses. Building up own resources is very time-consuming and ties up significant management resources,” adds Thomas Prüver.
Venture capital investors with investment activities in the German start-up market injected additional funds of almost USD 8b in 2017. In particular international financial investors and large German corporates are bolstering the market with significant means of growth financing. German VC investors have further strengthened the early-stage funding segment. With the returns from successful investments, they continue to contribute to the successful development of the German start-up ecosystem.
“Deep tech business models continue to face difficulties when it comes to acquiring significant funding,” says Prüver. This leads to comparatively early exits in Germany compared to the US. “In the short term, we will continue to see double-digit billion tech IPOs in the US rather than in Germany.” But Prüver and his team are optimistic: “In our project pipeline we are increasingly seeing businesses looking for funding that are operating in the artificial intelligence or blockchain sectors. From a mid and long-term perspective, Germany will continue to play a pioneering role provided that the necessary political tailwind is there.”
In summary, the market for technology investments in Germany shows an impressive development. The interest of international investors underscores the high attraction of Germany as a tech location.